US Airways scraps offer for bankrupt Delta
US Airways Group Inc on Wednesday (local time) withdrew a hostile offer for bankrupt Delta Air Lines Inc after Delta creditors rejected the bid, taking immediate pressure off rivals to merge.
US Airways, the No 7 US airline, pulled its $9.8 billion offer after Delta's official creditor committee, which plays a decisive role in determining its future, said it will support Delta's plan to exit Chapter 11 as a stand-alone company.
Delta employees line the room during a Senate hearing on airline mergers in Washington. Jay Mallin /Bloomberg News |
A separate, unofficial committee of creditors said it was disappointed about the US Airways deal's failure, which could "result in substantially diminished creditor recoveries" in the case.
The bid's demise should put the brakes on consolidation in the fragmented and highly competitive U.S. airline sector for now.
"This probably puts an end to (merger talk)," said airline consultant Michael Boyd. "There never was any need for airline consolidation."
Rivals such as UAL Corp's United Airlines and Continental Airlines engaged in preliminary talks on a tie-up in the wake of the US Airways bid for Delta.
Some analysts have said the US airline industry is overdue for consolidation because of high costs and aggressive competition, which puts pressure on air fares and has led to repeated bankruptcy for a number of carriers. But reluctant management and anti-trust concerns have prevented deal making.
Recent capacity cuts and few orders for new aircraft mean the industry is better positioned than in the past to withstand a downturn, said Boyd.
US Airways' shares rose 4 percent on relief the deal had been called off. Delta shares, which will be canceled upon exiting bankruptcy, fell 6 percent.
US Airways, the smallest of the US legacy carriers, is confident it can compete on its own against rivals, such as the world's No 1 carrier, American Airlines, a unit of AMR Corp.
"We are extremely confident in our own stand-alone plan," US Airways Chief Executive Doug Parker said in a statement.
US Airways posted a fourth-quarter net profit of $12 million, up from a year-earlier loss of $261 million.
"Looking forward, we expect even higher earnings," Parker said.
But US Airways, formed in 2005 from a merger with America West, still has work to do.
"They've still got to get the last merger done. They've got a lot of debt issues, a lot of issues," Boyd said. "They've got a lot on their plate. It's not like they're bored."
And some observers expect to see US Airways looking to shake up the industry again at some point.
Agencies
(China Daily 02/02/2007 page16)
